The National Labor Relations Board, the main federal labor law enforcement agency, announced Monday that it was vacating its December ruling that sharply limited corporate legal liability under what’s called the “joint employer” doctrine.
The board said that one of its members that voted in the case, William Emanuel, should have recused himself.
The announcement was the latest twist in the long-running controversy over the board’s joint employer stance. Monday’s announcement means for the time being, the board will revert to an Obama-era precedent that vastly expanded corporate legal liability, especially for ones that franchise their brands, such as McDonald’s.
The change means those corporations will once again find themselves potentially liable for workplace law violations at their franchisees, most of which are independent, privately-owned businesses that merely rent out the corporate brand.
“The National Labor Relations Board (3-0, Member Emanuel did not participate) today issued an Order vacating the Board’s decision in Hy-Brand Industrial Contractors, Ltd. and Brandt Construction Co… in light of the determination by the Board’s Designated Agency Ethics Official that Member Emanuel is, and should have been, disqualified from participating in this proceeding,” the board said in a statement.
Joint employer refers to when one business is so intertwined with a second one that it can be held legally responsible the second business’s workplace policies. Until 2015, that required one business to have “direct control” over the other’s policies.
But in a 2015 case called Browning-Ferris, the then-Democratic majority appointee NLRB changed the standard to the much vaguer “indirect control.” The move was highly controversial with the business community, which argued the new standard was far too broad and ambiguous. In December’s Hy-Brand case, the board, now with a Republican majority, overturned Browning-Ferris and restored the standard back to “direct control.”
In a Feb. 9 report to the board, however, NLRB Inspector General David Berry said that Emanuel, a Trump appointee to the board, “should have should have been recused from participation in Hy-Brand” due to potential conflicts of interest. Emanuel’s former management-side law firm, Littler Mendelson, had represented one of the clients in Browning-Ferris. Berry argued that because the ruling in Hy-Brand incorporated elements from the dissent in Browning-Ferris that linked the two cases. “[T]he Board’s deliberation in Hy-Brand, for all intents and purposes, was a continuation of the Board’s deliberative process in Browning-Ferris,” he argued.
The IG’s probe was prompted by an inquiry Democratic lawmakers including Sen. Elizabeth Warren, D-Mass., had made to Emanuel in late January regarding whether he should have recused himself.
The vacation of the Hy-Brand case means the Obama-era joint employer standard may stay in place for a while. The board, which operates by simple majority, is currently split 2-2 between Republican and Democratic appointees. President Trump has nominated business lawyer John Ring to fill the fifth seat. Even if that pick is confirmed by the Senate, Emanuel may find himself under pressure to recuse himself from any other case that would overturn Browning-Ferris, leaving the board without a GOP majority in that situation.
